Warehouse space galore as manufacturers hit the wall

Photo by: HENG CHIOVAN
A factory lies empty in Canadia Industrial Park in Phnom Penh’s Meanchey district.

The Phnom Penh Post

http://www.phnompenhpost.com/

Written by NATHAN GREEN AND SOEuN SAY
Wednesday, 22 April 2009

Prime industrial sites are coming onto the market as garment factory owners look to strip machinery and convert their buildings to other uses

Cambodia's unravelling garment sector is leaving factory landlords out of pocket and causing the postponement of some new factory developments.

Factory landlords were also now looking to strip their buildings of machines and rent them out as warehouses in order to generate an income, Bonna Realty Group General Manager Charles Villar told Prime Location Tuesday.

"Others even have their properties converted into anything that meets their clients needs so they can be rented out," he said.

Villar said data gathered by the firm's listing team showed a 20 to 35 percent increase in factories available to rent from the end of last year.

Rental prices had decreased as a result of garment factory closures, he said, dropping from around US$2.50 per square metre last year to anywhere from $1 to $1.70 per square metre now.

"There is not much demand for factories nowadays, but we are still very optimistic about this because Cambodia is one of the most open markets in Southeast Asia today," he said.

About 70 garment factories shut their doors between August last year as orders declined, industry officials told the Post last month.

Chea You Se, the president of Seng Phioa Garment Factory, is just one factory owner facing this predicament. His factory had sub-contracted to a larger garment manufacturer from 2005 until this year, when the larger factory went bust.

He is now looking to rent the 1000-square-metre factory, which includes 80 textile machines, for between $1.50 and $2 per square metre.

"If I cannot rent the factory to a manufacturer, I will be forced to look for more orders myself," he said.
As a last resort he said he would sell his textile machines and convert the warehouse to another use.

"Its prime location near Phnom Penh International Airport would make it ideal for a small business, or it could be easily converted into a school," he said.

Developments postponed
Cambodian Priority Property Investment Co helps manufacturers rent factory space.

General Manager Kong Vansophy said while the company's factories still had tenants, its services as a letting agent had all but dried up, and they had shelved plans to build new factory space.

"I have not attracted any new clients to rent factory space since the world economic crisis," he said.

"If they need a factory for rent I will build more for them, but nowadays it is so quiet I cannot build."

Lity Yap, marketing director at the Phnom Penh Special Economic Zone, said the second phase of the planned 360-hectare development had been put on hold due to the number of factory closures.

"We were supposed to launch phase two this year, but instead we will wait and see how it goes," she said.

"Everybody is taking a wait-and-see approach." But not all new factory developments have been suspended. Development of the 100-hectare Phnom Den Special Economic Zone is ongoing, said Duong Tech, general manager of Duong Chhiv Group, the zone's developer.

Slated for completion in 2015, the zone would cater to agricultural processing companies rather than garment manufacturers, he said.

Chea Vuthy, deputy secretary general of the Cambodia Special Economic Zone Board under the Council for the Development of Cambodia said three special economic zones in Preah Sihanouk province were also currently under construction.

"Among the three SEZs under construction, one has a garment factory in operation and one has a garment factory under construction and 50 percent completed," he said.